VOLUNTARY SUPPLY CHAIN SECURITY PROGRAM IMPACTS: AN EMPIRICAL STUDY WITH BASC MEMBER COMPANIES

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VOLUNTARY SUPPLY CHAIN SECURITY PROGRAM IMPACTS
AN EMPIRICAL STUDY WITH BASC MEMBER COMPANIES
2nd WCO PICARD Conference, Brussels, March 28th,
2007
Ximena Gutiérrez (main author) and Juha Hintsa
(co-author, presenting) Ecole Polytechnique
Fédérale de Lausanne and IML International
Institute for the Management of Logistics HEC
University of Lausanne and Cross-border Research
Association.
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Cross-border Research Associaton

• Team of academic researchers in Lausanne,
  Switzerland not-for-profit organization
• working since summer 2001 on cross-border and
  security research
• started EU AEO research in summer 2005, as part
  of broader supply chain security management
  (SCSM) studies
• Mission to innovate and execute various types of
  research, analysis and case studies surrounding
  the broad field of supply chain security
  management programs, standards, measures,
  trade-offs and costs.
• Our research helps companies in international
  trade and logistics to better plan and prepare
  for the implementation of new supply chain
  security standards
• And it helps governmental administrations, mainly
  customs and transportation agencies, to better
  understand the realities and constraints of
  international supply chains, while developing new
  security standards, public-private partnerships
  etc.

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Agenda

• Study Motivation
• BASC and the international supply chain security
  environment
• Study description
• Findings
• Conclusions
• Other studies

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Definition

• Supply Chain Security Management, SCSM
• Aims to minimize any type of crime at any stages
  of supply chains
• Individual security measures typically have one
  or more of the following goals prevent detect
  - recover
• Crime can be of minor or major nature
• Crime can consist of taking out and adding in
• Crime includes theft, smuggling, sabotage,
  terrorism
• (partially also counterfeit, parallel trade etc.
  however, these happen normally in separate
  supply chains)
• Note proper SCSM can help companies to deal with
  other types of supply chain risks, including
  industrial accidents, natural disasters etc.

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Study Motivation

• Increasing attention to protect global supply
  chains against illegal acts
• Great variety of security initiatives from
  country specific operational regulations to
  global research and technology piloting programs.
  
• Multiple implementation possibilities
• Little empirical evidence about the impacts of
  these programs for the companies that have
  implemented them.

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BASC and the new supply chain security environment
BASC, existing since 1996 has evolved towards a
complete security management system covering
multiple aspects of the supply chain security
Note this diagram is for illustration purposes
only
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Various SCSM programs appear to contain similar
security measures, in 6 subgroups

• Supply Chain
• Security Initiatives
• 1. Global voluntary
• ISO 28000/1/3/4
• WCO SAFE
• TAPA
• 2. Global mandatory
• ICAO
• IMO/ISPS
• Dangerous
• goods
• 3. North America
• voluntary
• C-TPAT
• CSI

System
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Supply Chain Security Management Analysis
Framework
Source CBRA Gutierrez, Hintsa, Carvalho,
2005-2006
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Study description

• Coordination Cross-border Research Association,
  École Polytechnique Fédérale de Lausanne and HEC
  University of Lausanne.
• Carried out from January 2005 February 2006
• BASC, interesting case due to its long experience
  in supply chain security.
• 20-questions survey, distributed to 800 BASC
  member companies in 10 different countries.
• Survey design in collaboration with BASCs
  direction and five BASC chapter directors from
  different countries.

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Findings
Sample characteristics
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Findings
Companies motivation to involve in BASC
certification
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Findings
Security measures degree of implementation
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Findings
Benefits of investing in security
The most important benefits
The least important benefits
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Findings
Benefits expectation vs. attainments

• Attainments were higher or very close to
  expectations for almost all the security direct
  benefits and for some supply chain efficiency
  related benefits.
• In contrast, benefits related with cost savings
  (direct and indirect), efficiency under high
  alert/post disaster conditions and facilitation
  of border crossing operations were on average
  less attained than expected

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Findings
Relationship between security measures and
benefits
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I. HIGH Cost, HIGH effectiveness 1. Protection of
business information/data 2. Facility
protection 3. Facility monitoring 4. Inventory
management and control 5. Warehouse/terminal
layout design 6. Quality information/data
management 7. Data exchange with Customs
administrations
II. LOW Cost, HIGH Effectiveness 8. Inspections
during the shipping process 9. Organizational
roles and responsibilities 10. Employee hiring /
exit process 11. Company security management
system 12. Recordkeeping of shipping information
for potential security audits 13. Business
partners evaluations
The most expensive security measures are not
necessarily the most effective and vice verse
There is no positive linear relationship between
cost and effectiveness
IV. LOW Cost, LOW effectiveness 19. Personnel
training process 20. Information dissemination
process 21. Prevention, detection and reporting
of shipping process anomalies 22. Establishment
of collaborative relationships with Customs
administration 23. Logistics system designed to
reduce risks 24. Security culture development 25.
Use of international standards for data management
III. HIGH Cost, LOW effectiveness 14.
Exploitation of cargo and vehicle anti-tampering
technical solutions 15. Access/presence control
processes and technologies 16. Exploitation of
cargo tracking technical solutions 17. Logistics
system designed for quick eventual
disaster/failure 18. Exploitation of cargo
inspection technical solutions management
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Findings
Strategies to build efficient supply chain
security programs

• Identifying the security measures which are more
  likely to produce better results in terms of
  security with low investments could be a useful
  strategy to enhance security efficiently
• Understanding why certain measures are less
  effective or more expensive than others and
  finding out whether it is possible to transform
  them into better security measures

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Conclusions

• This study presents empirical data about the
  cost, efforts required and effectiveness of
  supply chain security programs.
• Qualitative benefits were proven to exist, but
  respondents were hardly able to explain the
  quantifiable gains of these achievements.
  Potential future studies.
• Results showed that companies not only improve
  their image but they got various security direct
  benefits and some contributions to supply chain
  efficiency.
• BASC companies, based in risky countries, have
  shown that it is possible to enhance security
  within difficult conditions.

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Conclusions (cont)

• Businesses expect significant incentives from
  governments for the participation in this
  program. However these benefits showed to be less
  attained than the expectations.
• The capability of Customs Administrations and
  government agencies to provide or not these
  benefits will determine the difference between
  two possible future scenarios for security
  certifications as
• i) Real secure vs. unsecure trader
  differentiators
• ii) Minimum requirements for companies to carry
  out activities in international trade.
• BASC members have covered the entire cost of
  enhancing security in their supply chains. It is
  to be studied if for new programs cost sharing
  between the private and the public sector will be
  feasible.

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• SEE YOU ALL AT SCSM2007 CONFERENCE
• IN LAUSANNE / VEVEY, SWITZERLAND
• OCTOBER 2007